STATEMENT
of the
Honorable Nydia M. Velázquez, Ranking Democratic
Member
House Committee on Small Business
Press Conference for Introduction of the Small Business
Access to Capital Act
April 27, 2005
Once a year we take the time to recognize
the contributions that our nation's entrepreneurs make
to this country during National Small Business Week.
Even though small businesses are the country's
economic drivers and job creators, accessing the capital
they need to successfully grow a business is always
challenging, even in the best of times. With an economy
that continues to struggle and rising interest rates,
there is probably not a more difficult time to secure
affordable capital.
Historically that has been the role of
the 7(a) program. This partnership between small business
lenders and the government has allowed entrepreneurs
from all walks of life to secure affordable capital.
That was until 6 months ago when the current administration
came up with an idea that the program could run just
fine without the government's commitment.
The theory behind this was that all you
had to do was shift a little cost to the small business
and the lender. They argued that this would save the
taxpayer dollar, help reduce the growing budget deficit,
and provide more stability to the program. Sounds great
on paper - but as often the case, what may make for
interesting policy does not always turn out the way
it is planned.
Six months later the reality of this rhetoric
is very much different. In truth, the costs were not
minimal but as much as $3,000 dollars upfront, and for
some cases these fees could be as much as $50,000 over
the life of the loan.
Since this move, the program dropped a
half of a billion and the most recent data shows that
the second quarter has fallen even further. Lenders
are struggling to use the program and what had once
been a program with over 5,000 lenders participating
- has now been cut in half today.
I think given these realities Congress
must recognize that this grand experiment has not worked.
That is why I am here today with small business owners
and lenders to introduce the Small Business Access to
Capital Act. This legislation will lower the cost of
the program and give banks more tools to make the loans
we need to help our small businesses.
You will be hearing today from small businesses
who will tell you what they are seeing, and why they
are not getting the capital they need to succeed. You
will hear from community lenders that the fees are impacting
their ability to make the loans. This is an opportunity
for us to listen, and to take action so that we can
put capital back into the hands of our nation's small
businesses.
As we celebrate our nation's small businesses
this week - we need to make sure they have the ability
to access capital, spur economic development and create
employment opportunities all year long. This is what
the Small Business Access to Capital Act will do - it
will put capital back into the hands of our nation's
small businesses, and our nation's economy.
